Spain is warning that Europe's single currency will unravel

Spain is warning that Europe's single currency will unravel unless its leaders decide within weeks to centralise budget and tax policies in the eurozone and agree on a strategy to pool responsibility for failing banks. As Spain's prime minister, Mariano Rajoy, came under mounting international pressure to accept the eurozone's fourth national bailout in two years, the government in Madrid angrily rejected the demands, insisting that it did not need rescuing. With fears of a euro meltdown having rapidly shifted from Greece to Spain, Rajoy is pleading for a direct eurozone rescue of his country's banks, to avoid the humiliation attached to requesting a national bailout. Sources close to the Spanish government said its negotiating position was that the fundamental quandary facing the eurozone was not Spain, but a European failure of leadership in persuading the financial markets that the euro would be defended at all costs. A crucial Brussels summit at the end of the month would have to remedy that by agreeing to establish a eurozone banking and fiscal union, major federalising steps certain to be fought over intensely. Without that commitment, Spanish sources said starkly, the euro would be finished within months. The Spanish government believes that the eurozone's fourth-biggest economy is too big to rescue and that the consequences of abandoning Spain to the markets without a pledge of major European reform could be so ferocious that the single currency would not survive.

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